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Mean Reversion

Fundamentals

A trading philosophy based on the idea that prices tend to return to their average over time. Mean reversion strategies buy oversold conditions and sell overbought conditions.

Related Terms

RSI (Relative Strength Index)

A momentum oscillator ranging from 0 to 100 that measures the speed and magnitude of recent price changes.

Bollinger Bands

A volatility indicator consisting of a 20-period SMA with upper and lower bands at 2 standard deviations.

Learn More

Mean Reversion vs Trend Following

Level 6: Advanced Strategies · 20 min

The RSI-2 Strategy (Larry Connors)

Level 6: Advanced Strategies · 30 min